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Financial Services Commission
Mauritius
www.fscmauri tius.org
Making the Decision to Change Regulatory Structure:
Small Country Considerations
Mauritius: The Structural Decision Process in Retrospect
By
Dr Milan J.N. Meetarbhan
Chief Executive, FSC
World Bank Conference, 5 June 2006
Structure of Presentation
 History of Financial Sector Regulation
 Rationale for Integrated Regulation
 Establishment of a Single Regulator
 Guiding Principles of Regulation
 Benefits & Difficulties of Integration
 Challenges Ahead
 A New Regulatory Framework
Financial Services Commission Mauritius
www.fscmauritius.org
Current Status of Financial Sector Regulation
 Banking business regulated by the Central Bank
(Bank of Mauritius) since 1966
 Non-banking business (includes Global Business
sector) regulated by a single regulator (Financial
Services Commission) since 2001
Financial Services Commission Mauritius
www.fscmauritius.org
Non-Bank Financial Regulation Prior to 2001
Distinct & separate specialist regulatory agencies:
 Insurance business regulated by Insurance Division of
the Ministry of Finance
 Securities market regulated by the Stock Exchange
Commission since 1989. The stock exchange is operated
& managed by a private company.
 The non-bank offshore business regulated by the
Mauritius Offshore Business Activities Authority since 1992
 Certain non-bank deposit taking entities (e.g. leasing)
regulated by the Central Bank
Financial Services Commission Mauritius
www.fscmauritius.org
Driving Factors for Integration (1)
 Concerted approach to developing financial services
sector as part of economic diversification (outward
looking strategy for a small island economy)
 Facilitate process of integration between offshore and
domestic business
 Fill supervisory gaps across a range of financial activities
on offer in Mauritius
Financial Services Commission Mauritius
www.fscmauritius.org
Driving Factors for Integration (2)
 Concerns about the efficiency of a fragmented regulatory
system
 Achieve economies of scale due to smallness of the
financial sector – efficient, effective & harmonised use of
limited resources (human & technical)
 Better supervision of financial conglomerates addressing systemic risk and credit risk concentration in
the financial system
Financial Services Commission Mauritius
www.fscmauritius.org
Driving Factors for Integration (3)
 Oversight of the whole NBFI industry (hitherto
unregulated) to allow protection of investors’ and
consumers’ interests
 Harmonised & convergent approach in adhering to
international trends and best practices
 More focused strategy for promoting the financial
services sector
Financial Services Commission Mauritius
www.fscmauritius.org
Establishment of a Single Regulator (1)
 Establishment of a single regulator followed a number of
consultations, committees, reports since 1994
 Consultative Committee set up in 1997 to advise on a
comprehensive & integrated strategy for the
development of financial services
• The setting up of a Financial Services Authority was
recommended to the Ministry of Finance in 1997
• Debate about the internal governance of the proposed
Authority
Financial Services Commission Mauritius
www.fscmauritius.org
Establishment of a Single Regulator (2)
Steering Committee set up by Government in 2000 to
recommend on new regulatory framework for the financial
services sector:
“A unified financial regulatory authority,
covering both banking and non-banking activities,
be established in a phased manner…”
Financial Services Commission Mauritius
www.fscmauritius.org
Establishment of a Single Regulator (3)
 Financial Services Development Act 2001:
setting up an integrated financial regulator
• Financial Services Commission
• Financial Services Promotion Agency
• Financial Services Consultative Council
 Segregation of regulation and promotion
• Recommendation of the Edward’s Report
 Regulatory functions of the 3 former specialist regulatory
agencies were absorbed into the FSC
 Very broad statutory mandate for the FSC
 Regulatory oversight of the whole non-bank financial
services
Financial Services Commission Mauritius
www.fscmauritius.org
Evolution of the FSC: 2001 - 2005
Nascent phase
 Building up the structure
• Governance addressed from 2 angles
» Public & Internal governance of the FSC
 Building up the capacity (resources & infrastructure)
 Building up the normative framework
• Legislation & regulations
» Establishing a regulatory framework for all entities that fall
under the FSC’s ambit
» Facilitating further integration of the domestic and global
business sectors
Financial Services Commission Mauritius
www.fscmauritius.org
Evolution of the FSC: 2001 - 2005
 Functioning of the FSC
 Organisation structure
• Industry grouping within the FSC maintained for a brief period to
allow smooth transition
• Functional grouping (established in 2003) - Licensing, Surveillance
& Policy/Research Directorates
• Clusters concept - optimal use of skills
 Competencies & skills building - in 3 years staff level more
than doubled to reach 124
 Sustaining international credibility – adherence to
international norms, undergo FSAP assessment in 2002
 Consolidation phase
Financial Services Commission Mauritius
www.fscmauritius.org
Guiding Principles of Regulation
 Statutory mandate – very broad remit
• Prudential, market conduct, consumer protection, reputation &
industry development
 Progressive & adaptable
• In line with the specific nature & level of development of NBFI
industry in Mauritius (high market concentrated with few major
players)
 Best practice
• International dimension provided by Global Business
 Consultative approach
• Concerted efforts in collaboration with stakeholders
(industry operators, other agencies)
Financial Services Commission Mauritius
www.fscmauritius.org
Benefits of Integration (1)
 Develop supervisory clout
– synergy of regulatory expertise across all sectors,
common principles of supervision
 Larger organisation
– more effective and optimum use of skills &
competencies, attract higher calibre staff
 Rationalised & harmonised procedures for licensing &
regulating NBFIs, avoidance of duplication
Financial Services Commission Mauritius
www.fscmauritius.org
Benefits of Integration (2)
 Harmonised collaboration with international standardsetting bodies for effective adherence to international
norms
 AML/CFT framework driven by exposure of Global Business
sector – application of framework to other domestic financial
services
 Greater benefit to insurance sector – regulation has
been strengthened. Other NBFIs have benefited from the
risk based supervision
 Consolidation of corporate governance, risk
management & internal control systems
Financial Services Commission Mauritius
www.fscmauritius.org
Difficulties of Integration
 Teething problems resulting from implementation of
new legislation – need for clarity & certainty
 Change in regulatory structure:
shift from sectoral to functional approach
 Managing transition process by FSC:
gaps in regulation, human resources, infrastructure, etc.
Financial Services Commission Mauritius
www.fscmauritius.org
Challenges Ahead
for the Financial Services Sector
 The financial services sector to become a more
dynamic & important component of the Mauritian
economy
 Enhance international competitiveness of Mauritius
as an IFC
 Maintain & consolidate global reputation of Mauritius
 Development – cf. Promotion
 Promoting investment culture in Mauritius
Financial Services Commission Mauritius
www.fscmauritius.org
Challenges for the FSC
 Currently at a turning point: focus on business development in
a sound and clean environment
 Facilitate product/service development
 Refine regulatory framework
 Uplift stakeholder service delivery
 Clear & coherent framework for communication & cooperation
 Formulating a new investor & consumer framework
 Regulating competition
 Building a competent organisation
Financial Services Commission Mauritius
www.fscmauritius.org
A New Approach to Integrated Regulation
 Guiding Principles
 Balanced regulation
 Business friendly regulation
 Progressive regulation
 Efficient regulation
 Risk-based regulation
Financial Services Commission Mauritius
www.fscmauritius.org
Financial Services Commission
Mauritius
www.fscmauri tius.org
Thank you for your kind attention
4th Floor, Harbour Front Building
John Kennedy Street, Port Louis
Tel: (230) 210 7000 – Fax: (230) 208 7172
E-mail: fscmauritius@intnet.mu